Luxembourg will not immediately oppose 'equalisation' tax

'Equalisation tax' – proposed in a memo by French, German, Italian and Spanish finance ministers – would target turnover of digital companies such as Amazon and Google instead of their profits.

14.09.2017

Luxembourg Finance Minister Pierre Gramegna will not immediately oppose a new tax on internet giants' revenues due to be proposed at a gathering of European finance ministers in Tallinn this weekend, the Wort understands.

The so-called 'equalisation tax' – proposed in a memo by the French, German, Italian and Spanish finance ministers – would target the turnover of digital companies like Amazon and Google instead of their profits.

"The amounts raised would aim to reflect some of what these companies should be paying in terms of corporate tax," the four ministers wrote ahead of the informal summit on Friday and Saturday.

Gramegna is expected to listen to the proposal, which would need the support of all EU members, before taking a stance on the issue, the Wort understands.

At the summit, the Estonian presidency will lead the debate among finance ministers. It has also circulated a memo, recommending changes to the rules on 'permanent establishment' for digital companies.

Under the proposal, a company with a significant digital footprint in a country – even if it lacks a physical presence there – would be deemed to have a "virtual permanent establishment" and be liable to corporation tax.

The largest European Union member states have repeatedly raised concerns that digital companies are paying too little tax on revenues derived across the Continent.

However, Luxembourg's government coffers have been boosted by hosting the European headquarters of digital companies such as US online retailer Amazon and messaging service Skype.

In Brussels, some have suggested the impetus for renewed attention on the issue is due to the French government's defeat in a billion-dollar tax dispute with US giant Google.

In mid-July, a Paris court declared that the US company did not have to pay €1.1 billion for the period between 2005 and 2010 as demanded by the authorities.

The European Commission's efforts to consolidate corporation tax across Europe have also stalled for several months, partly due to opposition from countries such as Ireland and Luxembourg.